EASTHAM –– Property taxes are projected to rise by 3.48 percent in fiscal 2023 (or $177 for a property of average assessed value), Finance Director Rich Bienvenue told the select board and finance committee on Monday, Jan. 3. That would require a Proposition 2½ override vote at town meeting in the spring.
Proposition 2½ limits towns’ ability to increase their overall property tax levy from one year to the next. The levy can increase by no more than 2.5 percent without an override vote. New development in the town adds a little to overall revenue, but not enough to cover the difference between 2.5 percent and the 3.48 percent that Bienvenue predicts.
A town meeting majority vote is required to override the Prop 2½ cap.
The increase in property taxes is needed to pay for a projected rise in the town’s operating budget, said Bienvenue, who is also assistant town administrator. He said that the fiscal 2023 operating budget is expected to be 8.02 percent higher than the current year while delivering “level services” — meaning it will provide the same services as this year.
Increases in the cost of salaries and employee benefits are responsible for $463,000 of the $2.6 million increase, said Bienvenue. Other expenses, which include health insurance and pension funds, will rise by $677,000. Debt service on the water project is responsible for an increase of $1.1 million, but this is “exempt debt,” he said, and does not contribute to the need for an override.
Bienvenue further predicted that budget overrides would likely be needed every four to six years to keep up with inflation.
He explained that Proposition 2½, which was introduced in 1980 as a way to check municipal spending by limiting towns’ ability to raise taxes, is an artificial cap that has no relation to inflation. Under the law, the town is expected to accommodate all increases in expenses with increased revenue of no more than $742,000 — $602,000 (which is equal to 2.5 percent of Eastham’s fiscal 2022 tax levy) plus $140,000 from the “new growth” levy allowance (derived from property development in Eastham in the past year).
Bienvenue said that “current inflationary and wage pressures” would necessitate the repeated future overrides he expects.
“We’ve had a very good contract with refuse disposal in trucking,” Bienvenue noted as one example. “That’s expiring in 2025. That would be an area of inflationary concern.”
To limit the number of overrides necessary, he suggested tying them to staff contract cycles “and stewarding those funds to make sure you’ve got the funding to get you through the life cycle of an employment contract.”
The only other way to avoid an override would be to increase other sources of revenue, the finance director argued. Bienvenue said that Eastham does not have a “diversity of revenues” and relies heavily on receipts, which include local property taxes and beach fees. Bienvenue added that he and Town Administrator Jacqui Beebe had discussed raising waste disposal and recreation fees, but he did not provide any details on Monday.
Finance committee vice chair Steve Cole asked Bienvenue if he thought a budget override was really necessary.
“There’s a situational price of going for overrides,” Cole said. He said he was concerned that voters might push back against asking for an override to raise $500,000 when, elsewhere in the budget, there was $900,000 in free cash that was set to be spent on affordable housing.
“Is there any place that won’t hurt where we could avoid doing an override, when the need for an override is only one percent of the budget?” Cole asked.
Bienvenue responded that he had stuck to conservative practices in assembling his budget draft. The town’s policies direct him to use an estimate of between 80 and 85 percent of the previous year’s recorded revenues.
“You want to keep the 15 percent for conservative budgeting purposes in case you do have a downturn,” Bienvenue said. “Then you have a way to go back, because you can’t go back to the well once you’ve had town meeting.”
The $900,000 Cole referred to would be allocated to achieving the goals of Eastham’s Housing Production Plan. The current plan aims to provide an average of 13 affordable rental and home ownership units per year through the development of property, rental subsidies, housing rehabilitation, and other means.
This money for housing is expected to come from short-term rental tax revenues from fiscal 2021. Bienvenue said that the town has not yet received all of the rental tax money from fiscal 2022.
